fbpx

ARA 2020: The Future of Auto Recycling

On November 11, as part of the ARA Convention & Expo, Don Porter hosted a session entitled The Future of Auto Recycling. Photo: ARA

Electronics, EVs, demand data all key moving forward.

From November 11-13, the Automotive Recycler’s Association (ARA) hosted its annual convention and expo, albeit in virtual form due to the COVID-19 pandemic.

The event featured an interactive Expo Hall, as well as a networking centre and various video seminars taking place in the virtual Auditorium.

In, The Future of Auto Recycling on November 11; Don Porter, CEO of United Recyclers Group, provided a fascinating overview of the auto recycling industry, including its origins, where things are today and how they are likely to evolve in the future.

“To think about the future of Auto Recycling, we have to go back to the past to see what it was like,” said Porter.

Enterprising business

He referred to the fact that Auto Recycling has always been an enterprising business and in the 1920s and 1930s, when personal transportation for the masses really became a reality, what to do with worn-out vehicles that were traded in or discarded became a growing concern. Savvy business operators learned that they could acquire cars such as Ford Model As and Model Ts for very little money, and make more selling the salvageable parts from them. They also learned that more expensive luxury vehicles such as Cadillacs and Lincolns, while more expensive to buy for salvage ($25-$35, versus $5-$10 for Model As and Ts), had a very high scrap value—due to the amount of aluminum used in their construction.

Fast forward today and while some of the original recycling operations are still in business, the industry has changed dramatically. Porter noted that with vehicles being far more complex today and consumer expectations changing, so is the way in which vehicles are dismantled and parts are inventoried. In fact, the types of parts being inventoried is changing with more emphasis on sensors and electronics than ever before.

Additionally, the COVID-19 pandemic has had a major impact on the entire automotive ecosystem, since the density and number of miles/kilometres driven has declined significantly since March 2020.

Impact on vehicle ownership

Porter noted that with the total number of miles driven in the U.S. expected to drop by 270 million through the end of the year, this also could have a significant impact on vehicle ownership.

“Vehicle ownership could fall from 1.97 vehicles per household to 1.87,” said Porter. “And while that might not seem like much, it could reduce actual vehicle ownership by 7-14 million vehicles.”

He also noted the political push to get more electric vehicles on the road and while there are approximately 1.5 million EVs on U.S. roads at present, in order to achieve any meaningful reduction in emissions, there would need to be 50 million of them on the roads within the next decade.

The signing of an executive order by California Governor Gavin Newsom that attempts to ban the sale of new conventional internal combustion engine vehicles in the state by 2025 could also have widespread implications for auto recyclers whose operations are based there.

“EV and hybrid powertrains add thousands of dollars to the cost of repairs,” said Porter. He noted that battery packs can cost up to $6000 for the unit alone and, if the panels surrounding the pack are damaged and also need repair, the battery packs need to be removed for safety which adds additional labour cost to the repairs.

“Hard hit EVs are usually deemed total losses and that is due to the uncertainty in predicting an accurate and final cost for the repairs,” said Porter.

Value of EV components

A big question for recyclers going forward, is that if EVs continue to proliferate in the manner many pundits think they will, what will be the value of their driveline components and battery systems—an important consideration since today, the powertrain is still the most valuable part of a vehicle as far as recyclers are concerned.

Additional costs for collision repairs have already been realized over the last decade due to the widespread introduction of Advanced Driver Assistance Systems (ADAS). Porter noted that in many cases, these can add $3000 or more to the total cost of collision repairs with individual sensors and cameras ranging anywhere from $500 to $1100 or more, depending on the particular component and vehicle application.

And with so many more of these parts required to enable late-model vehicles to function properly, Porter noted that it was important for recyclers to consider adding more and more of these types of parts to their inventory to keep up with demand from their collision repair shop customers.

In fact, a separate interchange may be required, just to keep track of ADAS components and related parts.

Additionally, with the growth in artificial intelligence (AI) and machine learning for the collision repair estimating process, how damage is assessed, and vehicles allocated for collision repairs is also having an impact on auto recyclers.

Porter noted that some systems being developed can also double as salvage evaluation and bidding tools, using individual recycler’s demand data to conclude the viability of vehicles and parts for collision repairs. Over time, this type of technology is only expected to become faster, smarter and more efficient.

Another factor for recyclers to consider is the advancing age of the overall vehicle park. In Canada, the average vehicle age is now close to 10 years, while in the U.S it is up to 11.7.

Lasting longer

And if COVID-19 trends continue to persist, with fewer vehicles being driven, more will last longer and with ADAS systems designed to reduce the frequency and severity of collisions, that could mean over the coming years, demand for older vehicles to remain in service and the parts required to support them will continue to grow.

For these kinds of vehicles, especially if they are involved in minor collisions, the ability for savvy recyclers to provide used, good condition ADAS components for repairing them should be a significant priority and revenue opportunity going forward.

Porter also noted, however, that for the automotive ecosystem and circular economy to work effectively long term, recyclers will need to be able to work with insurers to obtain demand data from them so they can inventory and supply the parts required. “Insurers, like everybody else,” said Porter, want to utilize quality recycled parts in the repair process. It is right for the insurer and right for the need customer and it is right for the environment.”

Popular posts

Calendar

Stay in the loop

AAPEX 2020 Button

SEMA360 Button

Our partners

Menu
X